US facing increasing risks to energy security - US Chamber

25 May 2010 22:57  [Source: ICIS news]

WASHINGTON (ICIS news)--The US will face an increasing risk to its energy security over the next five to 10 years that could undermine the nation’s economy, a major business group said on Tuesday, citing rising power costs and uncertain foreign supplies.

The US Chamber of Commerce said that an analysis of 37 different government-sourced data sets indicated that the US would become increasingly vulnerable to oil and electricity cost increases, insufficient domestic energy capacity and uncertain access to foreign energy resources as China, India and other fast-developing nations increasingly compete for global supplies.

The chamber, whose 3m member companies include hundreds of US chemical and plastics producers, said those risks would directly impact the nation’s economic viability unless policymakers took steps to improve energy policy.

The forecast was made as part of the chamber’s announcement of its index of US energy security risk, an analysis tool that compiles data from the 37 government and private sector source files to establish risk levels over the last 40 years in light of policies put in place during those four decades.

The chamber’s subsidiary group, the Institute for 21st Century Energy, said the correlation between past polices and energy prices and availability also provided a tool going forward to assess proposed bills or regulations and their likely impact on energy security.

The 37 metrics that make up the index include such measures as the security of world oil, gas and coal reserves, the dependability and costs of US energy imports, energy spending as a percent of gross domestic product (GDP), national energy consumption, commercial and industrial energy efficiency, electricity production and transmission capacity, transportation fuel use and efficiencies, private and government research and development (R&D) spending and energy-related emissions, among others.

With 1980 chosen as the base rating of 100 - when US energy security risk was at its highest due to the Arab oil embargo of 1973, the Iranian revolution of 1978, Russia’s invasion of Afghanistan in 1979 and the onset of the Iran-Iraq war in 1980 - the index measures those metrics from 1970 to the present and projects them forward to 2030.

The index showed that the current risk to US energy security was measured at 85.6, largely due to the decline in US energy consumption and imports due to the recession.

But Karen Harbert, president of the institute, said US energy risks were on a course to increase sharply over the next five to 10 years and could approach the highest-risk mark of 100 by 2018.

She cited rising energy costs as a major risk factor, with the US Energy Information Administration (EIA) projecting significant increases in retail electricity prices and dramatic oil price gains through 2030.

In addition, she said, the nation’s limited electric transmission capacity raised the risk factor because the US was not adding enough new line capacity to meet projected power demand, which likely would result in increased blackouts in the decade ahead.

Finally, greater energy demands in and oil purchases by the fast-developing economies of China, India and other emerging nations would drive crude prices even higher and create uncertainties for US access to dependable foreign oil resources.

The chamber’s energy risk index can be seen at the institute’s website.

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By: Joe Kamalick
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